Keys Printing Plans to Issue a $1,000 Par Value,20-Year Noncallable

question 32

Multiple Choice

Keys Printing plans to issue a $1,000 par value,20-year noncallable bond with a 7.00% annual coupon,paid semiannually.The company's marginal tax rate is 40.00%,but Congress is considering a change in the corporate tax rate to 45.00%.By how much would the component cost of debt used to calculate the WACC change if the new tax rate was adopted?

• A) -0.36%
• B) -0.42%
• C) -0.44%
• D) -0.30%
• E) -0.35%

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Definitions:

Scenario Planning

A strategic planning method that organizations use to envision and prepare for various future conditions or events.

Short-Term

Pertaining to a limited time period, usually referring to immediate goals, plans, or investments.

Scenario Planning

A strategic planning method that organizations use to envision and prepare for multiple future conditions or outcomes.

Future States

Potential and envisioned scenarios or conditions that an organization or system aims to achieve in the long term.